The Electronics Source Book
July 13, 2005
As component suppliers move to lead-free versions of their parts to comply with the European Union’s regulations against hazardous materials, what will happen to all the parts that still contain lead? This question comes from one of our readers who wondered what would happen to the inventory of non-compliant parts after the July 1, 2006 RoHS deadline. The answer – or guesswork – is varied and complicated.
Many of the large component suppliers have made it easy on themselves by going compliant early. We’ve written about some component suppliers such as Texas Instruments, Actel and IDT that went green early. By the time the RoHS deadline comes next year, their leaded parts will be at a minimum if they still exist at all. Unfortunately, most component suppliers either didn’t have the resources or the planning wherewithal to attack the problem early enough to flush non-compliant parts from the supply chain well before the deadline.
We took the question to experts in the component industry and found the consensus view is that there will initially be great interest in leftover leaded parts by those in industries that are exempt from RoHS regulations. This exempt group includes the defense industry and portions of the telecommunications industry. The telecommunications industry will eventually have to comply – probably in 2010 – but for now, they can still use leaded parts.
Over at component distributor Avnet Inc., company officials expect the pile of non-compliant parts could be considerable. “It’s hard for us to tell because people are still making leaded parts and some of our suppliers won’t switch until after the first of the year,” says Pat Wastal, SVP and director of the IP&E Business Group at Avnet. “There will certainly be leaded parts around after the deadline.”
Another question that remains is what exactly will happen to those parts. “Some suppliers will take them back, and we’ll hang on to some for our exempt customers,” says Wastal. “But we’re not sure whether they will be worth a lot or they will be worth nothing.”
Those parts that are not used heavily in the exempt industries will likely be sold on the gray market just as any other inventory overhang. Some will be used by companies that don’t sell into Europe, while others will be used by companies that simply can’t tell the difference between a leaded and lead-free component. The biggest mystery is how much inventory will be involved.
Some experts believe that the large number of parts that will suddenly go obsolete will produce a large excess of unwanted parts. “There will be an imbalance of inventory. This is an end-of-lifecycle issue we haven’t seen before in the industry,” says Peter Lachapelle, VP of content and SRM at supply chain software firm i2 Technologies, a company that tracks components in the electronics industry. “Leaded parts will be disposed of or liquated at severe discounts.”
One of the inventory snafus that will likely occur as we near the RoHS deadline is that leaded parts for the exempt military will go up in price. Over the past 20 years, the defense industry has been buying a good portion of its components from the commercial parts market. Those parts are made in higher volume than the parts specifically designed for the military’s high-reliability standards.
The military will want to continue to buy leaded parts from the commercial market, but those suppliers will be producing lead-free parts. Some suppliers will continue producing leaded parts for exempt industries, but the volume will be much lower. Some suppliers say they don’t intend to raise their prices for the low volume leaded parts they will continue to produce, but many in the industry believe that’s temporary. “The military will be challenged to find economically viable leaded parts,” says Lachapelle. “The economies of scale that brought commercial parts down in price will not be there for leaded parts.”
Lachapelle believes the components industry has entered uncharted waters in the move to RoHS compliant parts. He notes that change in the electronic industry has usually been driven by innovation. This change comes from outside regulation. Lachapelle believes that change driven by innovation is less disruptive. He views change driven by regulation as very disruptive.
1. Industry braces for the lead-free conversion
2. Progress on lead-free components spotty
3. IDT: 99 percent lead free already
4. Actel goes green on 100% of its FPGA products
5. Lead-free parts: Welcome to the messy supply chain
6. Are the military and telecommunications industries off the hook on RoHS?
7. Will
electronic equipment fail from tin-whisker shorts?
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